APPLIED ECONOMETRICS

(Third quarter)

Jaume García Sergi Jiménez Geert Mesters

jaume.García@upf.edu sergi.jimenez@upf.edu geert.mesters@upf.edu
Jaume I building 20.223 Jaume I building 20.280 Jaume I bulding 20.1E80

Lectures: Thursday, Friday 9:00-10:30 Room: 40.146

Seminars: 102 Wednesday 13:00-14:30 Room: 40.153

103 Wednesday 14:30-16:00 Room: 40.153

Objectives

The course will introduce the student into the empirical analysis of some economic issues
using econometric techniques.

The course will be organized around some economic topics, closely related to some papers in
the literature. There will be a general emphasis on the usual stages in applied work in
economics:

- How to define the question to be analyzed (objective)

- The economic theory framework corresponding to the empirical model
- The type of data necessary (and available) for the analysis
- The econometric techniques adequate for the exercise given the characteristics of the
data and the model
- The interpretation of the results
- The elaboration of the conclusions

The course will pay specific attention to the econometric techniques used in the different
topics.

Prerequisites

Similar to those in the Econometrics I, II and III courses in the grade of Economics at
Universitat Pompeu Fabra, i.e:

- Basic knowledge of the concepts of statistical inference, hypothesis testing and

maximum likelihood estimation
- Knowledge of the regression model and consequences of problems of internal and
external validity
- Basic knowledge of instrumental variables, time series and dynamic causal effects
- Basic knowledge of microeconometrics: discrete choice models, limited-dependent
variables models, panel data
Organization

Teaching consists of 19 lectures and 6 seminars of 1.5 hours each. The econometric
methodologies and the discussion of an empirical application associated to each topic will be
developed in the lectures. Seminars will be devoted to the discussion of empirical homework
exercises, one for each topic, and also to the presentation of the contents of published papers
related to empirical applications of the econometric techniques of each topic. Students will be
asked to write an essay based on an empirical exercise they have to do with real data, to be
presented in the last two lectures of the course. In order to practice team work, homework
exercises, presentations of papers and the essay are expected to be done in groups of 3-4
people belonging to the same seminar group.

The solutions of the assignments should be sent by mail, as a pdf file, before the date of the
corresponding seminar. The deadline for handing in the essays is June 6.

Participation and asking questions are highly encouraged in lectures and seminars.

Evaluation

In order to pass the course, the student should obtain at least 50 points out of 100, minimum
of 20 from the exam, according to the following distribution:

Paper presentation: 15 points

Empirical essay and presentation: 25 points

Exam: 60 points

For those not passing the course in June and who have obtained at least 15 points in the exam
and have attended and participated in the seminars, there will be a second chance to take the
exam in July.

Syllabus

1. Multinomial discrete choice models (MDCM)

 Independence of Irrelevant Alternatives
 Nested Logit
 Mixed Logit

2. Forecasting realized volatility (FRV)

 High frequency data versus daily data
 Models for high frequency data (AR, HAR, GARCH, GARCH-RV)
 Forecasting. Comparison of forecasts

3. Forecasting inflation (FI)

 Characteristics of inflation
  Models for inflation (AR, VAR, DFM)
 Forecasting. Comparison of forecasts

4. Duration models (DM)

 Basic concepts
 Continuous time models
 Unobserved heterogeneity

5. Policy Evaluation Methods (PEM)

 Differences in differences
 Propensity score matching
 Regression discontinuity design

There will also be additional empirical references for each topic to be discussed in the
presentations.

The econometric contents of the topics can be followed using the lecture notes and the
following textbooks:

Jones, A., Applied Econometrics for Health Economists: A Practical Guide, Radcliffe
Publishing, 2007 (basic)

Greene, W.H., Econometric Analysis, Prentice Hall, 2008 (intermediate)

Cameron, A.C. and Trivedi, P.K., Microeconometrics. Methods and Applications,

Cambridge University Press, 2005 (advanced)

Cameron, A.C. and Trivedi, P.K., Microeconometrics using STATA, STATA Press, 2010
(advanced)

Stock, J.H. and Watson, M.K., Introduction to Econometrics, Addison-Wesley, 2010

Wooldridge, J.M., Econometric Analysis of Cross-Section and Panel Data, MIT Press,
2010 (advanced)
Course plan

Lecture April 9 Multinomial Discrete Choice Models Jaume García

Lecture April 10 Forecasting Realized Volatility Geert Mesters
Lecture April 16 Multinomial Discrete Choice Models Jaume García
Lecture April 17 Forecasting Realized Volatility Geert Mesters
Lecture April 24 Multinomial Discrete Choice Models Jaume García
Lecture April 30 Forecasting Realized Volatility Geert Mesters
Seminar May 6 Assignment MDCM Jaume García
Lecture May 7 Forecasting Inflation Geert Mesters
Lecture May 8 Forecasting Inflation Geert Mesters
Seminar May 13 Assignment FRV Geert Mesters
Lecture May 14 Forecasting Inflation Geert Mesters
Lecture May 15 Duration Models Jaume García
Seminar May 20 Papers’ presentations Jaume García
Lecture May 21 Duration Models Jaume García
Lecture May 22 Duration models Jaume Garcia
Seminar May 27 Assignment FI Geert Mesters
Lecture May 28 Policy Evaluation Methods Sergi Jiménez
Lecture May 29 Policy Evaluation Methods Sergi Jiménez
Seminar June 3 Assignment DM Jaume García
Lecture June 4 Policy Evaluation Methods Sergi Jiménez
Lecture June 5 Assignment PEM Sergi Jiménez
Seminar June 10 Papers’ presentations Jaume García
Lecture June 11 Essays’ presentations Jaume García
Lecture June 12 Essays’ presentations Jaume García

Assignments

Communication of the composition of the groups: April 17

(the same group for assignments, presentations and essay)

Deadline
Hand in the day before the corresponding seminar by mail to the following address:
applied.econometrics.upf@gmail.com (as a pdf file)
Papers’ presentations

Communication of the date of the presentation: April 24

Papers available: May 14 for those to be presented in May 20
June 4 for those to be presented in June 10
Written report: Summary of the paper with the following structure:
- Objective
- Theoretical framework
- Econometric specification
- Main issues related to the data
- Main results and conclusions
- Weak aspects of the paper
- Improvements
Maximum extension: 10,000 characters including blanks
Hand in the written report and the slides (pdf files) the day before the
presentation by mail the address above

Essay

Communication of the topic: May 2

Hand in the written report and the slides (pdf files) by June 11 to the mail address above